The democratisation of investments
Readers, The Dawn of New Beginnings, book one of the Bermuda Islander Financial Planning Primer Series, is available on The Royal Gazette website. Click on the Business tab near the top of the webpage and you will find Bermuda Islander in the drop down menu.
It features the introduction, Step 1 – Becoming a Brand, and Step 2 – Setting Goals, along with local islander commentary. Step 3 – Embracing Change, will be posted on Monday.
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Investments and forms of investing have been around for a very long time, an estimated 5,000 years, according to the authors, Norton H Reamer and Jesse Downing in their stunning, so outstanding and meticulously researched book Investment A History.
Here is a tiny overview of this amazing book (about 435 pages, with more than 100 just devoted to notes and references). For thousands of years investments, investing and its results were limited to those that had power, owned land, had wealth and/or status, had access to human capital, lending, or operated trade industries: in other words, the echelons of government, church, nobility, and military.
Those that did not have access to, or were not situated in elevated life stations to such wealth-building proliferations could not begin to allocate resources, participate in investing, and generate a return above an ordinary wage.
Land and property – the finite asset
Ancient societies defined status and financial success by land ownership. It was a key absolute for the transfer of wealth to future generations; to use as lending collateral with accompanying interest generation; an agriculture profit source; as a compensation source for government officials or feats of valour (in medieval times, knights in shining armour were awarded titles and land (and the serfs, possible slaves, that were tied to the land) as rewards for valiant battles); utilised for land leasing to tenant farmers; or placed into public domain ownership for creative collaboration to benefit the entire community.
Your home is your haven
The quest for land/property ownership has never gone out of style. Bermuda islanders deeply value home/land ownership, a rigorously pursued goal during earlier decades for two reasons: little access, means, and limited information to develop an investment portfolio and the security of owning a piece of the rock. In many respects, it may be still stated that “one’s home will be the family’s greatest assets.”
Fast forward through numbers of millenniums including the Middle (Dark) Ages, a time of demographic, cultural and economic decline (Wikipedia), then encompassing 1600s to 1900s, economic stagnation turned into a rebirth. The advent of the Renaissance and hundreds of other creators and economic influences, there became a slow, but insistent rise of a middle-class. Investments previously unreachable now became the purview of at least some ambitious middle-tier businesspeople in trade, industry, finance, etc. They could now raise capital collectively and limit risk for financial ventures, particularly in marine exploration, in joint-stock corporations (a precursor of modern corporate structure).
Astonishingly, according to Britannica, one of the earliest joint-stock companies was the Virginia Company, founded in 1606 to colonise North America. By legislation at that time, individual shareholders were not responsible for actions undertaken by the company and, in terms of risk exposure, shareholders could lose only the amount of their initial investment. History buffs have seen reference to the English East India Company granted a Royal Charter by Elizabeth I in 1600, but other European nations were far advanced. The earliest records of a joint-own company was 1,000 years earlier during the China Tang dynasty (618-907).
Bermuda, our beloved island, started her long journey to semi-autonomy as a company asset. Yes, an incorporated company owned by shareholders that paid dividends earned by early Bermuda settlers, slaves, tenant farmers, indentured servants, and freemen.
The Virginia Company, as listed above, administered the island as an extension of Virginia until 1614.
Its spin-off, the Somers Isles Company, took over in 1615 and managed the island until 1684, when the company's charter was revoked and Bermuda became an English Crown Colony. Following the 1707 unification of the parliaments of Scotland and England, which created the Kingdom of Great Britain, the islands of Bermuda became a British Crown Colony.
Investment A History, in its historical research, cites three major developments during the redevelopment period 1600-1900, and entering modern times, that changed our world as individuals, families, businesses and countries. Those developments were:
• the conception of joint-stock companies (and their modern counterpart, public corporations)
• the Industrial Revolution and
• the advent of public markets.
Finally, after thousands of years of financial success concentrated within the inner circles of a few, the investment arena not only opened a very accessible door, but invited everyone with surplus savings to participate.
This access to financial choices, control of one’s money and the appreciation of investable assets that came with these choices, was revolutionary.
People everywhere could begin to plan, financially and otherwise, for the future.
Stay tuned for Part 2, “The conception of a corporate structure” and what it means to the ordinary investor. The advent of pensions and, gasp, being able to work towards and plan for a retirement. The ultimate democratisation of investments and investing; Bermuda during this time; and the overview story of its modern emergence as seen by a returning Bermudian after 37 years off “de Rock.”
• Investment A History by Norton H. Reamer and Jesse Downing, Columbia University Press
Martha Harris Myron, CPA JSM, a native Bermudian, is creator of Pondstraddler Life™ Financial Perspectives www.pondstraddler.com, international financial consultant to the Olderhood Group Ltd Bermuda, and financial columnist (since 2000) to The Royal Gazette, Bermuda. All proceeds from these articles are donated by The Royal Gazette to the Salvation Army, Bermuda.